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Day of rest and diddling in the middle, with earnings starting to steer the ship

Day of rest and diddling in the middle, with earnings starting to steer the ship

Collective Intelligence!

With all the hype around Intel from the analyst community, their numbers will drive the tape into tomorrow. IF Wall Street hears corp capex is turning up there will be a new bull theme. Corp capex will help [IBM], [HPQ], [CSCO], [DELL], [MSFT], [ORCL] etc.; another quarter of not hearing that will prove problematic as there is a decent bet it will happen and [INTC] is key driver of the message. All those opposed say: stephen – Problem the write off for capital goods accelerated depreciation expired Dec 31. Roger – PC sales continue to decline.

Today was a day of rest, minor consolidation/digestion as pointed out by the day’s sluggish price action, 6-handle range and spent much of the time diddling in the middle… The [SPX] rallied 36ish handles, posting a new all-time high yesterday in 2 days, erasing 15 calendar days of down work = would you not expect some laborious movement? The pre-market economic data played no role, but the earnings miss by [C] [CSX] and the bomb delivered by [BBY] made up for the lack of eco headlines. Bernanke is on his farewell tour and therefore nothing new from him today. The [BKX] and [XLF] were lagging while the [NDX] tried to hold things together. Roger (13:50) Financials lagging today XLF -0.72% BKX -1.05% – digesting their gains. The million-dollar question is: consolidating for the next leg up as we have seen throughout this bull run to new all-time highs?

The alternative path: The following is what the Investors Intelligence data has been pointing toward … and has been indicating for a few weeks now. In Investors Intelligence parlance a reading above 55%, recently posted as 61.+% and 62% record high – is/has been cause for concern – as the market may be overextending. Note: The CBOE put/call ratio is at lows not seen since the summer, 2nd – 3rd qtr of 2004. Indicating bullish, long calls at/near extreme levels. The S&P has traded lower 3 out of the next four months when it has retraced. In 2004, which is not necessarily indicative of today’s market, the S&P was down 7.2% from its high.

Bears in Retreat as Put-Call Ratio Hits Nine-Year Low (Bloomberg) — By one measure, demand for insurance against equity losses is drying up in the options market. For every 100 bullish contracts that changed hands on the Chicago Board Options Exchange, 73 bearish ones traded on average in the past 20 days, the lowest ratio since December 2004. The measure, which includes individual stocks and indexes, shows investors are using fewer options to hedge their holdings after the Standard & Poor’s 500 Index reached a high yesterday. The broadest equities rally and three rounds of stimulus from the Federal Reserve have helped persuade investors that the almost five-year bull market is sustainable. The S&P 500 hasn’t fallen more than 10 percent for the past two years. Stocks erased their year-to-date loss yesterday after the World Bank raised its global growth forecasts and Bank of America Corp.’s profit beat analysts’ estimates.

Today the S&P started with 163 k ESH and 600 SPH traded on Globex, ESH trading range was 1843.75 – 1836.75. Wednesday’s regular trading hours (RTH’s), pit session trading range was 1845.30 – 1836.70 before settling at 1841.60, up 8.7 handles. The Fed’s Williams spoke, Philly Fed beat and Bernanke spoke on challenges facing central banks / farewell tour, but all in all had little impact on the markets. Today’s open 2 handles lower to 1839.30 – 1839.50 and traded in a tight range of 1840.80 to 1834.70. The MrTopStep imbalance Meter, MiM, tracked between a modest $250M to $200M to sell. The cash close traded 1840.30 before settling at 1836.20, down 5.4 handles on the day in light volume of 950k.

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Yesterday’s news: IMF sees rising risks of deflation – “For the advanced economies, the outlook is subject to significant risks, Lagarde said. With inflation running below many central bank targets, there are rising risks of deflation, which could prove disastrous for the recovery. “If inflation is the genie, then deflation is the ogre that must be fought decisively,” Lagarde said. She noted that, during the years of financial crisis, emerging markets had kept the global economy afloat. Together with the developing countries, they accounted for three-quarters of global growth over the past half decade. But a growing number of emerging markets are slowing down as the economic cycle turns, and there are risks arising from financial market turbulence and the volatility of capital flows.

Stiglitz raps US, free trade policies - accuses the US of negotiating over issues already settled at the World Trade Organization – When it comes to criticising his country’s policies on capital flows or world trade negotiations, US Nobel laureate Joseph Stiglitz minces no words. http://bit.ly/1dpTolW

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